Posted on: 21st February 2022
Reading time: 4 mins
One of the many benefits of hybrid working is that companies no longer need to take out long, expensive office leases, saving them huge amounts of money.
Office rent is typically one of a company’s biggest costs. But the new hybrid working model – where people can work remotely at home and at local workspaces, making the occasional visit to a head office – means those costs can be considerably reduced through downsizing – or at least right-sizing.
“In the past, we would just go out and get a long-lease office with 50 or 100 seats, but flexibility is very important in this current environment,” says Arvind Kumar, Global VP at NTT Global Sourcing, which is one of many companies to have integrated flexible workspace from Regus parent company IWG into their real-estate portfolio.
Whether a company is closing satellite offices, moving to a more compact HQ or doing a combination of both, being responsible for a smaller dedicated office footprint is a key driver of reduced overheads. Central to this shift is the fact that offices don’t need to accommodate all employees at the same time under the hybrid model. This kind of downsizing enables a leaner business model and frees up finances that can be invested elsewhere. According to Global Workplace Analytics, a typical employer can save about US$11,000 every year for every hybrid worker.
Although some companies are getting rid of central offices entirely, moving to a binary combination of working from home and local flexspaces, the prevailing trend is for a hybrid model in which a corporate HQ still plays an important role in operations. Increasingly, organisations are adopting a hub-and-spoke approach, using a number of satellite coworking spaces that are closer to employees’ homes in combination with an inner-city central office. Standard Chartered Bank and NTT are among several global firms that have partnered with IWG using this model.
Avoiding long, rigid office leases that can turn out to be cripplingly expensive is particularly important for companies that are expanding overseas or even domestically and providing employees with access to satellite flexspace allows businesses to expand (or contract) directly in line with how many workers they actually have. This can also be particularly advantageous for start-ups and small businesses, which can scale up or down at speed, according to their growth or current project pipeline.
“Years ago, Microsoft used to build an individual office for every single employee,” says Doug Demers, Managing Principal at B+H Architects and the Centre for Advanced Strategy. “It was part of their attraction as an employer. It served them well for a period of time, but now there’s going to be economic benefit to being more efficient in your portfolio model and how you use office space. The smarter people are adapting them and using them to their advantage.”
According to global real estate consultancy JLL, the most expensive premium office rental markets in the world are Hong Kong, New York, Beijing and London, costing as much as US$313 per square foot in 2020. With this in mind, companies in these locations are going to be particularly interested in the option to reduce their overheads by downsizing their corporate real-estate (CRE) footprint. Having a lower CRE also means lower utility bills, cleaning fees and office equipment costs, contributing yet further to reduced overheads.
Reduced overheads is one of ten trends identified in IWG’s white paper, The Future of Work: a trends forecast for 2022.
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